University of Minnesota

Internal Sales

“Capital Equipment and Depreciation Reconciliation”

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Learning Objectives

As a result of this session, participants will be able to:• Set-up the account structure to record the purchase of a capital

asset and record depreciation• Reconcile current fixed assets. • Include equipment expense (depreciation) in the rate

development, budget and record actuals• Validate depreciation with Inventory Services vs. rate

Development and Budget.

Located at :

Inventory Services Website:

http://www.finsys.umn.edu/inventorysvs/inventorysvshome.html

Instructions for Transferring Capital Equipment Assets

http://www.policy.umn.edu/prod/groups/president/@pub/@forms/documents/form/um1556.pdf

Transferring or Selling Capital Equipment Assets to Another University Department:

http://www.policy.umn.edu/Policies/Finance/Inventory/PROPERTY_PROC02.html

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Inventory Services Website

Located at :

Transferring or Selling Capital Equipment Assets to Another University Department:

http://www.policy.umn.edu/Policies/Finance/Inventory/PROPERTY_PROC02.html

Asset Accounting, Asset Management, Asset Transfer Form – Financial Management Training Courses - http://www1.umn.edu/ohr/trainingservices/financial/efs/index.html#aa

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Inventory Services Website

• All capital assets in 115X as of 3/28/2011 were moved to the ISO Plant Fund 7201 – Internal Sale Capital Purchases.

• The total balance for the operating fund and plant fund did not change.

• Depreciation did not transfer from the operating fund to the plant fund.

• Any other capital equipment accounts did not transfer ex. Gain or losses, disposals ect.

• See Handout for communication and example

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History

Guiding Principles:

• Internal Organizations can recover the cost of capital equipment in the rates they charge other University Departments by including the appropriate depreciation in the rate development. Per federal regulations and U of M Policy, capital equipment cannot be purchased on ISO operating funds; it must be purchased and transferred to the plant fund, and the cost recovered for by the periodic depreciation charges to the ISO operating fund.

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Guiding Principles

Objectives: • Record depreciation in the ISO operating fund as an

expense (use of funds) that relates to the revenue generated.

• All fixed assets transferred to the internal sales Plant Fund 7201 after purchased.

• Depreciation included in the rate development reconciles to the depreciation recorded in the ISO operating fund and the plant fund.

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Objectives

• UM Reports for Non-Sponsored Reports - “Account Budget Status for Current Non-Sponsored Funds”

– Enter DeptID

– Group the report by Fund #

– Group the report by Program #

– Choose the option “Include Plant and Agency Funds”.

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Reconciliation Process

• Run a detailed transaction report for the Equipment Acquisitions. This will include a list of all the fixed assets transferred into the plant fund.

– Enter DeptID

– Enter for Fund Code 7201 – ISO Plant Fund

• Run a public query for department assets.

– ASSETS_BY_UNIT_AND_DEPT

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Reconciliation Process

• If there is value in account 168001 - Equipment Acquisitions or 168250 - Equipment in the operating fund 1150 or the fund designated for the ISO, the equipment value and depreciation must be moved to the Plant Fund.

– Complete transfer documents. UM 1556: Capital Equipment Asset Transfer Form (pdf)

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Reconciliation Process

• The amount that is in account 168001 – Equipment Acquisitions in the plant fund should be the purchase price plus all acquisition costs to put the capital asset in place of the capital equipment for the ISO.

– Compare the detailed transaction report to the list of expected equipment.

– Compare the Assets by Unit and Dept report to the list of expected equipment.

– Transferred all ISO assets to the ISO Plant Fund.

– Complete transfer documents to move assets.

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Reconciliation Process

• The carry forward balance in the plant fund should be the purchase price plus all acquisition costs of the asset less accumulated depreciation (net book value) at year end.

– If not, make correcting entry to record accumulated depreciation.

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Reconciliation Process

The amount that is in account 760101 – Equipment Depreciation in the plant fund should be the total amount of the depreciation for the fiscal year.

– If not correct, make correcting entry to record accumulated annual depreciation.

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Reconciliation Process

• The annual amount of depreciation for all ISO capital equipment should be included in the internal sales rate development.

• The total amount of depreciation recorded in the internal sales operating fund (1150 preferred) should equal the amount of total depreciation in account in the plant fund.

• The amount of depreciation transferred from the operating fund – 610301 – Non-Mandatory Transfer out to the plant fund 600301 – Non-Mandatory Transfer In .

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Reconciliation Process

• Depreciation in the annual rate development equals the annual depreciation transferred out of the operating fund.

• The annual depreciation in the Plant Fund will equal the annual amount of the depreciation transferred into the plant fund.

• The rates should be adjusted is there are any additions, retirements or upgrades.

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Results

• Include depreciation in the rate development

• Capitalize capital assets

• Only include purchased or donated assets

• Use ISO Plant Fund

• Transfer depreciation from operating fund to plant fund to record expense and replenish equipment purchase value

• Use Inventory Services to support activity

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Summary

Questions & Answers

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Questions & Answers